WOONSOCKET, R.I., Aug. 5, 2020 /PRNewswire/ --
Continued Responsiveness to COVID-19:
- Ongoing support for employees, clients and communities
across the country
- Opened more than 1,800 test sites at drive-thru locations to
date and continue to partner with federal, state and local
officials
- Launched Return ReadySM, a comprehensive COVID-19
business-to-business testing program
- Consumer-driven health care model increases access to
products and services
Second Quarter Year-over-Year Highlights:
- Total revenues increased 3.0% to $65.3 billion
- GAAP operating income increased 40.5% to $4.7 billion
- Adjusted operating income (1) increased 32.2% to
$5.3 billion
- GAAP diluted earnings per share of $2.26
- Adjusted EPS (2) of $2.64
Year-to-date Highlights:
- Generated cash flow from operations of $10.4 billion
2020 Full Year Guidance:
- Raised GAAP diluted EPS guidance range to $5.59 to $5.72 from
$5.47 to $5.60
- Raised Adjusted EPS (2) guidance range to
$7.14 to $7.27 from $7.04 to
$7.17
- Raised cash flow from operations guidance range to
$11.0 billion to $11.5 billion from $10.5
billion to $11.0
billion
CVS Health Corporation (NYSE: CVS) today announced operating
results for the three months ended June 30, 2020.
CVS Health President and CEO Larry J.
Merlo stated, "We're a health innovation company that is
built to meet the evolving needs of the millions we serve every
day. That's been made clear as we continue to navigate the health,
social and economic impacts of COVID-19. Our earnings in this
environment demonstrate the strength of our strategy and the power
of our diversified business model.
"We have a strong foundation of clinical expertise, data
analytics and digital capabilities, and unmatched consumer and
community reach which has allowed us to rapidly bring our strategy
to life at an unprecedented time. The environment surrounding
COVID-19 is accelerating our transformation, giving us new
opportunities to demonstrate the power of our integrated offerings
and the ability to deliver care to consumers in the community, in
the home and in the palm of their hand which has never been more
important. We have stayed true to our purpose of helping people on
their path to better health, and we remain focused on creating
value for all our stakeholders."
A summary of the Company's response to the COVID-19 pandemic is
included on page six.
_____________________________________________
The Company presents
both GAAP and non-GAAP financial measures in this press release to
assist in the comparison of the Company's past financial
performance with its current financial performance. See "Non-GAAP
Financial Information" on page 12 and endnotes (1) and (2) on
page 22 for explanations of non-GAAP financial measures presented
in this press release. See pages 13 through 14 and page 21 for
reconciliations of each non-GAAP financial measure to the most
directly comparable GAAP financial measure.
|
Consolidated Second Quarter Results
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
In millions, except per share amounts
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|
Change
|
Total
revenues
|
$
|
65,341
|
|
|
$
|
63,431
|
|
|
$
|
1,910
|
|
|
$
|
132,096
|
|
|
$
|
125,077
|
|
|
$
|
7,019
|
|
Operating
income
|
4,680
|
|
|
3,332
|
|
|
1,348
|
|
|
8,138
|
|
|
6,022
|
|
|
2,116
|
|
Adjusted operating
income (1)
|
5,328
|
|
|
4,031
|
|
|
1,297
|
|
|
9,441
|
|
|
7,626
|
|
|
1,815
|
|
Net income
|
2,986
|
|
|
1,931
|
|
|
1,055
|
|
|
4,998
|
|
|
3,358
|
|
|
1,640
|
|
Diluted earnings per
share
|
$
|
2.26
|
|
|
$
|
1.49
|
|
|
$
|
0.77
|
|
|
$
|
3.79
|
|
|
$
|
2.58
|
|
|
$
|
1.21
|
|
Adjusted EPS
(2)
|
$
|
2.64
|
|
|
$
|
1.89
|
|
|
$
|
0.75
|
|
|
$
|
4.55
|
|
|
$
|
3.51
|
|
|
$
|
1.04
|
|
Enterprise
prescriptions (3) (4)
|
690.3
|
|
|
685.5
|
|
|
4.8
|
|
|
1,436.9
|
|
|
1,365.3
|
|
|
71.6
|
|
- Total revenues increased 3.0% in the three months ended
June 30, 2020 compared to the prior
year driven by growth across all segments. Total revenues in the
three months ended June 30, 2020 were
impacted by the COVID-19 pandemic, which adversely affected
revenues in the Retail/LTC and Pharmacy Services segments primarily
as a result of reduced new therapy prescriptions due to lower
provider visits in the three months ended June 30, 2020, as well as reduced front store
revenues in the Retail/LTC segment due to shelter-in-place
orders.
- Operating income and adjusted operating income increased 40.5%
and 32.2%, respectively, in the three months ended June 30, 2020 compared to the prior year. The
increase in both operating income and adjusted operating income was
primarily due to the impact of the COVID-19 pandemic, which
resulted in reduced benefit costs due to the deferral of elective
procedures and other discretionary utilization in the Health Care
Benefits segment, partially offset by reduced volume and increased
operating expenses associated with the Company's COVID-19 pandemic
response efforts in the Retail/LTC segment.
- Net income increased 54.6% in the three months ended
June 30, 2020 compared to the prior
year primarily due to the higher operating income described above,
partially offset by higher income tax expense associated with the
increase in pre-tax income.
- The effective income tax rate was 24.6% for the three months
ended June 30, 2020 compared to 25.5%
for the three months ended June 30,
2019. The decrease in the effective income tax rate was
primarily due to the favorable resolution of several state and
local income tax matters in the three months ended June 30, 2020, partially offset by the
reinstatement of the non-deductible Health Insurer Fee ("HIF") for
2020.
Pharmacy Services Segment
The Pharmacy Services segment provides a full range of pharmacy
benefit management solutions to employers, health plans, government
employee groups and government sponsored programs. The segment
results for the three and six months ended June 30, 2020 and
2019 were as follows:
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
In millions
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|
Change
|
Total
revenues
|
$
|
34,889
|
|
|
$
|
34,842
|
|
|
$
|
47
|
|
|
$
|
69,872
|
|
|
$
|
68,400
|
|
|
$
|
1,472
|
|
Operating
income
|
1,271
|
|
|
1,197
|
|
|
74
|
|
|
2,385
|
|
|
2,047
|
|
|
338
|
|
Adjusted operating
income (1)
|
1,327
|
|
|
1,296
|
|
|
31
|
|
|
2,508
|
|
|
2,243
|
|
|
265
|
|
Total pharmacy claims
processed (4) (5)
|
505.4
|
|
|
489.0
|
|
|
16.4
|
|
|
1,046.8
|
|
|
970.8
|
|
|
76.0
|
|
Pharmacy network
(6)
|
425.1
|
|
|
412.1
|
|
|
13.0
|
|
|
886.2
|
|
|
819.8
|
|
|
66.4
|
|
Mail choice
(7)
|
80.3
|
|
|
76.9
|
|
|
3.4
|
|
|
160.6
|
|
|
151.0
|
|
|
9.6
|
|
- Total revenues increased $47
million in the three months ended June 30, 2020 compared to the prior year, as
growth in specialty pharmacy and brand inflation were largely
offset by previously disclosed client losses and continued price
compression.
- Total pharmacy claims processed increased 3.4% on a 30-day
equivalent basis in the three months ended June 30, 2020 compared to the prior year
primarily driven by net new business, partially offset by reduced
new therapy prescriptions due to lower provider visits in the three
months ended June 30, 2020.
- Operating income and adjusted operating income increased 6.2%
and 2.4%, respectively, in the three months ended June 30, 2020 compared to the prior year
primarily driven by growth in specialty pharmacy and improved
purchasing economics. The increase was partially offset by
continued price compression and previously disclosed client losses.
The increase in operating income also was driven by lower
amortization expense in the three months ended June 30, 2020.
See the supplemental information on page 16 for additional
information regarding the performance of the Pharmacy Services
segment.
Retail/LTC Segment
The Retail/LTC segment fulfills prescriptions for medications,
provides patient care programs, sells a wide assortment of general
merchandise, provides health care services through walk-in medical
clinics, provides medical diagnostic testing and provides services
to long-term care facilities. The segment results for the three and
six months ended June 30, 2020 and 2019 were as follows:
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
In millions
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|
Change
|
Total
revenues
|
$
|
21,662
|
|
|
$
|
21,447
|
|
|
$
|
215
|
|
|
$
|
44,411
|
|
|
$
|
42,562
|
|
|
$
|
1,849
|
|
Operating
income
|
933
|
|
|
1,551
|
|
|
(618)
|
|
|
2,713
|
|
|
2,789
|
|
|
(76)
|
|
Adjusted operating
income (1)
|
1,057
|
|
|
1,669
|
|
|
(612)
|
|
|
2,959
|
|
|
3,158
|
|
|
(199)
|
|
Prescriptions filled
(4) (5)
|
345.4
|
|
|
349.1
|
|
|
(3.7)
|
|
|
720.5
|
|
|
695.9
|
|
|
24.6
|
|
- Total revenues increased 1.0% in the three months ended
June 30, 2020 compared to the prior
year primarily driven by pharmacy drug mix, growth in retail
pharmacy prescription volume and brand inflation. These increases
were partially offset by continued reimbursement pressure, the
impact of recent generic introductions, decreased long-term care
prescription volume and lower front store revenues.
- Front store revenues decreased 4.6% in the three months ended
June 30, 2020 compared to the prior
year. The decrease was primarily due to reduced customer traffic in
the segment's retail pharmacies due to shelter-in-place orders in
response to the COVID-19 pandemic.
- Prescriptions filled decreased 1.1% on a 30-day equivalent
basis in the three months ended June 30,
2020 compared to the prior year. The decrease was primarily
driven by reduced new therapy prescriptions due to lower provider
visits in the three months ended June 30,
2020 and decreased long-term care prescription volume,
partially offset by the continued adoption of patient care
programs.
- Operating income and adjusted operating income decreased 39.8%
and 36.7%, respectively, in the three months ended June 30, 2020 compared to the prior year. The
decrease in both operating income and adjusted operating income was
primarily due to the impact of the COVID-19 pandemic, which
resulted in incremental operating expenses associated with the
Company's COVID-19 pandemic response efforts, decreased front store
volume and reduced new therapy prescriptions, as well as continued
reimbursement pressure. These decreases were partially offset by
improved generic drug purchasing in the three months ended
June 30, 2020.
See the supplemental information on page 17 for additional
information regarding the performance of the Retail/LTC
segment.
Health Care Benefits Segment
The Health Care Benefits segment offers a full range of insured
and self-insured ("ASC") medical, pharmacy, dental and behavioral
health products and services. The segment results for the three and
six months ended June 30, 2020 and 2019 were as follows:
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
In millions, except
percentages
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|
Change
|
Total
revenues
|
$
|
18,468
|
|
|
$
|
17,403
|
|
|
$
|
1,065
|
|
|
$
|
37,666
|
|
|
$
|
35,273
|
|
|
$
|
2,393
|
|
Operating
income
|
3,066
|
|
|
1,062
|
|
|
2,004
|
|
|
4,161
|
|
|
2,217
|
|
|
1,944
|
|
Adjusted operating
income (1)
|
3,464
|
|
|
1,438
|
|
|
2,026
|
|
|
4,955
|
|
|
3,000
|
|
|
1,955
|
|
Medical benefit ratio
("MBR") (8)
|
70.3
|
%
|
|
84.0
|
%
|
|
(13.7)
|
%
|
|
76.4
|
%
|
|
84.0
|
%
|
|
(7.6)
|
%
|
Medical membership
(9)
|
|
|
|
|
|
|
23.6
|
|
|
22.8
|
|
|
0.8
|
|
- Total revenues increased 6.1% in the three months ended
June 30, 2020 compared to the prior
year primarily driven by membership growth in the Health Care
Benefits segment's Government products and the favorable impact of
the reinstatement of the HIF for 2020. These increases were
partially offset by the absence of the financial results of Aetna's
standalone Medicare Part D prescription drug plans ("PDPs"), which
the Company retained through 2019, and membership declines in the
segment's Commercial insured products.
- Operating income and adjusted operating income increased 188.7%
and 140.9%, respectively, in the three months ended June 30, 2020, compared to the prior year. The
increase was primarily driven by reduced benefit costs due to the
deferral of elective procedures and other discretionary utilization
in response to the COVID-19 pandemic, growth in the segment's
Government products and the impact of cost reduction efforts,
including integration synergies. These increases were partially
offset by membership declines in the segment's Commercial insured
products.
- The Health Care Benefits segment's MBR decreased 1,370 basis
points from 84.0% to 70.3% in the three months ended June 30, 2020 compared to the prior year
primarily due to the deferral of elective procedures and other
discretionary utilization related to COVID-19 described above and
the reinstatement of the HIF for 2020.
- Medical membership as of June 30,
2020 of 23.6 million increased 124 thousand members compared
with March 31, 2020, primarily
reflecting increases in Medicare and Medicaid products, partially
offset by a decline in Commercial products.
- The Health Care Benefits segment experienced favorable
development of prior-periods' health care cost estimates in its
Commercial and Government businesses during the three months ended
June 30, 2020, primarily attributable
to first quarter 2020 performance.
- Prior years' health care costs payable estimates developed
favorably by $420 million during the
six months ended June 30, 2020. This
development is reported on a basis consistent with the prior years'
development reported in the health care costs payable table in the
Company's annual audited financial statements and does not directly
correspond to an increase in 2020 operating results.
See the supplemental information on page 18 for additional
information regarding the performance of the Health Care Benefits
segment.
COVID-19 Response
CVS Health is uniquely positioned to help the country through
the COVID-19 pandemic. The Company has focused its resources on the
wellbeing and safety of employees, consumers and the communities it
serves. The following are key actions taken to date:
Employees
- Providing regular supply of personal protective equipment and
adding safety features to retail stores.
- Provided enhanced benefits, including bonuses to frontline
employees, paid sick leave for part-time employees and paid time
off to employees who test positive or are quarantined due to
exposure.
- Announced intention to hire 50,000 additional full-time, part
time and temporary roles; over 40,000 hires to date.
Consumers and members
- Waived cost sharing for COVID-19 diagnosis and treatment,
including inpatient hospital admissions, for insured members.
- Opened crisis response line for members experiencing anxiety
related to COVID-19 and expanded 24/7 access to Aetna Nurse Medical
line for Aetna and Caremark members.
- Extended waivers for out-of-pocket costs for Aetna insured
members for inpatient admissions for treatment or health
complications associated with COVID-19 through September 30, 2020.
- Extended waivers for cost-sharing for in-network telemedicine
visits by Medicare Advantage members for outpatient behavioral and
mental health counseling services through September 30, 2020.
- Waived Medicare Advantage member out-of-pocket costs for all
in-network primary care visits, whether done in-office or via
telehealth, for any reason through September
30, 2020.
- For Commercial members, waived cost sharing for minor acute
care evaluation, care management services and certain behavioral
health services rendered via telephone through December 31, 2020.
- Expanded telehealth options ("E-Clinic") offered by
MinuteClinic to help patients access safe, affordable and
convenient non-emergency care.
- Extended maintenance prescriptions and waived early refill
limits to support medication adherence.
- Waived fees associated with prescription home delivery and
associated front store products. Testing autonomous vehicle
prescription delivery in collaboration with Nuro.
- Sent care packages to members diagnosed with COVID-19 through
Aetna's Healing Better program.
Plan Sponsors
- Launched Return Ready, a comprehensive customizable and
integrated end-to-end COVID-19 testing solution to assist employers
and universities with the safe return of their employees, students
and staff.
- Provided assistance through premium credits.
Providers
- Waived advance approvals, streamlined credentialing process,
relaxed telemedicine policies and removed prior authorization
requirements. Offering flexible plan designs to help reduce
financial burdens.
Communities
- Offering COVID-19 testing at over 1,800 CVS drive-thru
locations, with more than 50% located in communities with
significant need for support according to the CDC Social
Vulnerability Index.
- In coordination with the U.S. Department of Health and Human
Services ("HHS"), opened 11 testing sites serving communities
disproportionately impacted by the pandemic.
- Launched critical diagnostic testing for the vulnerable senior
population in long-term care facilities in partnership with 3
states.
- Administered nearly 2 million COVID-19 tests nationwide through
end of July.
- Expanded Coram infusion services to help transition eligible
IV-therapy patients to home-based care, freeing up hospital
capacity.
- Investing nearly $50 million
directly and through the Company's foundations to address food
insecurity, lack of access to telehealth services for the
underserved, personal protective equipment, mental health support
for front-line workers and community resilience.
- Returned all $43 million in funds
received from the Coronavirus Aid, Relief, and Economic Security
Act provider relief fund to HHS.
2020 Full Year Guidance
While acknowledging the inherent and unprecedented uncertainty
surrounding the ongoing COVID-19 pandemic and its impact, the
Company raised its full year 2020 GAAP diluted EPS guidance range
to $5.59 to $5.72 from $5.47 to $5.60 and its full year 2020
Adjusted EPS guidance range to $7.14
to $7.27 from $7.04 to $7.17, reflecting an update to
its estimated full year effective income tax rate. The Company
projects higher utilization in its Health Care Benefits segment in
the second half of 2020 than in the first half of 2020 and
continued significant COVID-19 related investments, including
operating costs, in the remainder of the year. The Company also
raised its full year 2020 cash flow from operations guidance range
to $11.0 billion to $11.5 billion from $10.5
billion to $11.0 billion.
The adjustments between GAAP diluted EPS and Adjusted EPS
include adding back amortization of intangible assets, integration
costs related to the Company's acquisition (the "Aetna
Acquisition") of Aetna Inc. ("Aetna") and expected gains/losses on
divestitures.
Teleconference and Webcast
The Company will be holding a conference call today for
investors at 8:00 a.m. (Eastern Time)
to discuss its second quarter results. An audio webcast of the call
will be broadcast simultaneously for all interested parties through
the Investor Relations section of the CVS Health website at
http://investors.cvshealth.com. This webcast will be archived and
available on the website for a one-year period following the
conference call.
About CVS Health
CVS Health employees are united around a common goal of becoming
the most consumer-centric health company. We're evolving based on
changing consumer needs and meeting people where they are, whether
that's in the community at one of our nearly 10,000 local
touchpoints, in the home, or in the palm of their hand. Our newest
offerings — from HealthHUB® locations that are
redefining what a pharmacy can be, to innovative programs that help
manage chronic conditions — are designed to create a
higher-quality, simpler and more affordable experience. Learn more
about how we're transforming health at www.cvshealth.com.
Cautionary Statement Concerning Forward-Looking
Statements
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements made by or on behalf of
CVS Health Corporation. Statements in this press release that are
forward-looking include Mr. Merlo's quotation, the information
under the heading "2020 Full Year Guidance" and the information
included in the endnotes and reconciliations. By their nature, all
forward-looking statements are not guarantees of future performance
or results and are subject to risks and uncertainties that are
difficult to predict and/or quantify. Actual results may differ
materially from those contemplated by the forward-looking
statements due to the risks and uncertainties related to the
COVID-19 pandemic, the geographies impacted and the severity and
duration of the pandemic, the pandemic's impact on the U.S. and
global economies and consumer behavior and health care utilization
patterns, and the timing, scope and impact of stimulus legislation
and other federal, state and local governmental responses to the
pandemic, as well as the risks and uncertainties described in our
Securities and Exchange Commission ("SEC") filings, including those
set forth in the Risk Factors section and under the heading
"Cautionary Statement Concerning Forward-Looking Statements" in our
most recently filed Annual Report on Form 10-K, our Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2020 and our recently filed Current
Reports on Form 8-K.
You are cautioned not to place undue reliance on CVS Health's
forward looking statements. CVS Health's forward-looking statements
are and will be based upon management's then-current views and
assumptions regarding future events and operating performance, and
are applicable only as of the dates of such statements. CVS Health
does not assume any duty to update or revise forward-looking
statements, whether as a result of new information, future events,
uncertainties or otherwise.
- Tables Follow -
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
In millions, except per share amounts
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenues:
|
|
|
|
|
|
|
|
Products
|
$
|
46,355
|
|
|
$
|
45,531
|
|
|
$
|
93,358
|
|
|
$
|
88,874
|
|
Premiums
|
16,927
|
|
|
15,791
|
|
|
34,567
|
|
|
32,073
|
|
Services
|
1,875
|
|
|
1,816
|
|
|
3,825
|
|
|
3,588
|
|
Net investment
income
|
184
|
|
|
293
|
|
|
346
|
|
|
542
|
|
Total
revenues
|
65,341
|
|
|
63,431
|
|
|
132,096
|
|
|
125,077
|
|
Operating
costs:
|
|
|
|
|
|
|
|
Cost of products
sold
|
40,242
|
|
|
38,970
|
|
|
80,589
|
|
|
76,217
|
|
Benefit
costs
|
11,751
|
|
|
13,087
|
|
|
26,138
|
|
|
26,546
|
|
Operating
expenses
|
8,668
|
|
|
8,042
|
|
|
17,231
|
|
|
16,292
|
|
Total operating
costs
|
60,661
|
|
|
60,099
|
|
|
123,958
|
|
|
119,055
|
|
Operating
income
|
4,680
|
|
|
3,332
|
|
|
8,138
|
|
|
6,022
|
|
Interest
expense
|
765
|
|
|
772
|
|
|
1,498
|
|
|
1,554
|
|
Other
income
|
(45)
|
|
|
(31)
|
|
|
(99)
|
|
|
(62)
|
|
Income before income
tax provision
|
3,960
|
|
|
2,591
|
|
|
6,739
|
|
|
4,530
|
|
Income tax
provision
|
974
|
|
|
660
|
|
|
1,741
|
|
|
1,172
|
|
Net income
|
2,986
|
|
|
1,931
|
|
|
4,998
|
|
|
3,358
|
|
Net (income) loss
attributable to noncontrolling interests
|
(11)
|
|
|
5
|
|
|
(16)
|
|
|
(1)
|
|
Net income
attributable to CVS Health
|
$
|
2,975
|
|
|
$
|
1,936
|
|
|
$
|
4,982
|
|
|
$
|
3,357
|
|
|
|
|
|
|
|
|
|
Net income per share
attributable to CVS Health:
|
|
|
|
|
|
|
|
Basic
|
$
|
2.27
|
|
|
$
|
1.49
|
|
|
$
|
3.81
|
|
|
$
|
2.58
|
|
Diluted
|
$
|
2.26
|
|
|
$
|
1.49
|
|
|
$
|
3.79
|
|
|
$
|
2.58
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
1,309
|
|
|
1,301
|
|
|
1,307
|
|
|
1,299
|
|
Diluted
|
1,314
|
|
|
1,302
|
|
|
1,313
|
|
|
1,302
|
|
Dividends declared
per share
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
In millions
|
June 30,
2020
|
|
December 31,
2019
|
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
14,869
|
|
|
$
|
5,683
|
|
Investments
|
2,596
|
|
|
2,373
|
|
Accounts receivable,
net
|
22,520
|
|
|
19,617
|
|
Inventories
|
16,519
|
|
|
17,516
|
|
Other current
assets
|
6,002
|
|
|
5,113
|
|
Total current
assets
|
62,506
|
|
|
50,302
|
|
Long-term
investments
|
18,594
|
|
|
17,314
|
|
Property and
equipment, net
|
12,221
|
|
|
12,044
|
|
Operating lease
right-of-use assets
|
20,571
|
|
|
20,860
|
|
Goodwill
|
80,057
|
|
|
79,749
|
|
Intangible assets,
net
|
32,225
|
|
|
33,121
|
|
Separate accounts
assets
|
4,639
|
|
|
4,459
|
|
Other
assets
|
4,682
|
|
|
4,600
|
|
Total
assets
|
$
|
235,495
|
|
|
$
|
222,449
|
|
|
|
|
|
Liabilities:
|
|
|
|
Accounts
payable
|
$
|
9,919
|
|
|
$
|
10,492
|
|
Pharmacy claims and
discounts payable
|
15,541
|
|
|
13,601
|
|
Health care costs
payable
|
7,362
|
|
|
6,879
|
|
Policyholders'
funds
|
3,636
|
|
|
2,991
|
|
Accrued
expenses
|
15,634
|
|
|
12,133
|
|
Other insurance
liabilities
|
1,644
|
|
|
1,830
|
|
Current portion of
operating lease liabilities
|
1,766
|
|
|
1,596
|
|
Current portion of
long-term debt
|
8,192
|
|
|
3,781
|
|
Total current
liabilities
|
63,694
|
|
|
53,303
|
|
Long-term operating
lease liabilities
|
18,612
|
|
|
18,926
|
|
Long-term
debt
|
63,481
|
|
|
64,699
|
|
Deferred income
taxes
|
7,136
|
|
|
7,294
|
|
Separate accounts
liabilities
|
4,639
|
|
|
4,459
|
|
Other long-term
insurance liabilities
|
7,270
|
|
|
7,436
|
|
Other long-term
liabilities
|
2,308
|
|
|
2,162
|
|
Total
liabilities
|
167,140
|
|
|
158,279
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Preferred
stock
|
—
|
|
|
—
|
|
Common stock and
capital surplus
|
46,276
|
|
|
45,972
|
|
Treasury
stock
|
(28,235)
|
|
|
(28,235)
|
|
Retained
earnings
|
48,768
|
|
|
45,108
|
|
Accumulated other
comprehensive income
|
1,213
|
|
|
1,019
|
|
Total CVS Health
shareholders' equity
|
68,022
|
|
|
63,864
|
|
Noncontrolling
interests
|
333
|
|
|
306
|
|
Total shareholders'
equity
|
68,355
|
|
|
64,170
|
|
Total liabilities and
shareholders' equity
|
$
|
235,495
|
|
|
$
|
222,449
|
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Six Months
Ended
June 30,
|
In millions
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
Cash receipts from
customers
|
$
|
129,218
|
|
|
$
|
120,808
|
|
Cash paid for
inventory and prescriptions dispensed by retail network
pharmacies
|
(76,381)
|
|
|
(70,567)
|
|
Insurance benefits
paid
|
(26,483)
|
|
|
(25,992)
|
|
Cash paid to other
suppliers and employees
|
(14,688)
|
|
|
(14,497)
|
|
Interest and
investment income received
|
395
|
|
|
512
|
|
Interest
paid
|
(1,407)
|
|
|
(1,502)
|
|
Income taxes
paid
|
(230)
|
|
|
(1,476)
|
|
Net cash provided by
operating activities
|
10,424
|
|
|
7,286
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Proceeds from sales
and maturities of investments
|
2,710
|
|
|
3,786
|
|
Purchases of
investments
|
(3,688)
|
|
|
(4,062)
|
|
Purchases of property
and equipment
|
(1,190)
|
|
|
(1,289)
|
|
Acquisitions (net of
cash acquired)
|
(768)
|
|
|
(250)
|
|
Other
|
6
|
|
|
14
|
|
Net cash used in
investing activities
|
(2,930)
|
|
|
(1,801)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Net repayments of
short-term debt
|
—
|
|
|
(275)
|
|
Proceeds from
issuance of long-term debt
|
3,946
|
|
|
—
|
|
Repayments of
long-term debt
|
(1,016)
|
|
|
(1,899)
|
|
Dividends
paid
|
(1,315)
|
|
|
(1,306)
|
|
Proceeds from
exercise of stock options
|
166
|
|
|
111
|
|
Payments for taxes
related to net share settlement of equity awards
|
(68)
|
|
|
(80)
|
|
Other
|
(16)
|
|
|
7
|
|
Net cash provided by
(used in) financing activities
|
1,697
|
|
|
(3,442)
|
|
Net increase in cash,
cash equivalents and restricted cash
|
9,191
|
|
|
2,043
|
|
Cash, cash
equivalents and restricted cash at the beginning of the
period
|
5,954
|
|
|
4,295
|
|
Cash, cash
equivalents and restricted cash at the end of the period
|
$
|
15,145
|
|
|
$
|
6,338
|
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Six Months
Ended
June 30,
|
In millions
|
2020
|
|
2019
|
Reconciliation of net
income to net cash provided by operating activities:
|
|
|
|
Net income
|
$
|
4,998
|
|
|
$
|
3,358
|
|
Adjustments required
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
2,188
|
|
|
2,183
|
|
Stock-based
compensation
|
179
|
|
|
226
|
|
Deferred income taxes
and other noncash items
|
(101)
|
|
|
(42)
|
|
Change in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
Accounts receivable,
net
|
(2,233)
|
|
|
(681)
|
|
Inventories
|
1,003
|
|
|
939
|
|
Other
assets
|
(560)
|
|
|
(314)
|
|
Accounts payable and
pharmacy claims and discounts payable
|
1,671
|
|
|
917
|
|
Health care costs
payable and other insurance liabilities
|
(415)
|
|
|
496
|
|
Other
liabilities
|
3,694
|
|
|
204
|
|
Net cash provided by
operating activities
|
$
|
10,424
|
|
|
$
|
7,286
|
|
Non-GAAP Financial Information
The Company uses non-GAAP financial measures to analyze
underlying business performance and trends. The Company believes
that providing these non-GAAP financial measures enhances the
Company's and investors' ability to compare the Company's past
financial performance with its current performance. These non-GAAP
financial measures are provided as supplemental information to the
financial measures presented in this press release that are
calculated and presented in accordance with GAAP. Non-GAAP
financial measures should not be considered a substitute for, or
superior to, financial measures determined or calculated in
accordance with GAAP. The Company's definitions of its non-GAAP
financial measures may not be comparable to similarly titled
measures reported by other companies.
Non-GAAP financial measures such as adjusted operating income,
adjusted earnings per share (EPS) and adjusted income attributable
to CVS Health exclude from the relevant GAAP metrics, as
applicable: amortization of intangible assets and other items, if
any, that neither relate to the ordinary course of the Company's
business nor reflect the Company's underlying business
performance.
For the periods covered in this press release, the following
items are excluded from the non-GAAP financial measures described
above, as applicable, because the Company believes they neither
relate to the ordinary course of the Company's business nor reflect
the Company's underlying business performance:
- The Company's acquisition activities have resulted in the
recognition of intangible assets as required under the acquisition
method of accounting which consist primarily of trademarks,
customer contracts/relationships, covenants not to compete,
technology, provider networks and value of business acquired.
Definite-lived intangible assets are amortized over their estimated
useful lives and are tested for impairment when events indicate
that the carrying value may not be recoverable. The amortization of
intangible assets is reflected in the Company's unaudited GAAP
condensed consolidated statements of operations in operating
expenses within each segment. Although intangible assets contribute
to the Company's revenue generation, the amortization of intangible
assets does not directly relate to the underwriting of the
Company's insurance products, the services performed for the
Company's customers or the sale of the Company's products or
services. Additionally, intangible asset amortization expense
typically fluctuates based on the size and timing of the Company's
acquisition activity. Accordingly, the Company believes excluding
the amortization of intangible assets enhances the Company's and
investors' ability to compare the Company's past financial
performance with its current performance and to analyze underlying
business performance and trends. Intangible asset amortization
excluded from the related non-GAAP financial measure represents the
entire amount recorded within the Company's GAAP financial
statements, and the revenue generated by the associated intangible
assets has not been excluded from the related non-GAAP financial
measure. Intangible asset amortization is excluded from the related
non-GAAP financial measure because the amortization, unlike the
related revenue, is not affected by operations of any particular
period unless an intangible asset becomes impaired or the estimated
useful life of an intangible asset is revised.
- During the three and six months ended June 30, 2020 and 2019, acquisition-related
integration costs relate to the Aetna Acquisition. The
acquisition-related integration costs are reflected in the
Company's unaudited GAAP condensed consolidated statements of
operations in operating expenses within the Corporate/Other
segment.
- During the six months ended June 30,
2019, the store rationalization charge primarily relates to
operating lease right-of-use asset impairment charges in connection
with the planned closure of 46 underperforming retail pharmacy
stores in the second quarter of 2019. The store rationalization
charge is reflected in the Company's unaudited GAAP condensed
consolidated statement of operations in operating expenses within
the Retail/LTC segment.
- The corresponding tax benefit or expense related to the items
excluded from adjusted income attributable to CVS Health and
Adjusted EPS above. The nature of each non-GAAP adjustment is
evaluated to determine whether a discrete adjustment should be made
to the adjusted income tax provision.
The Company's full year 2020 guidance reconciliation also
reflects an estimated gain on divestiture of the Company's Coventry
Health Care Workers Compensation business, which the Company sold
on July 31, 2020 for approximately
$850 million. The Company expects to
recognize a pretax gain on this divestiture of
approximately $225 million within the Health Care Benefits
segment in the third quarter of 2020. This amount has been excluded
from the projected full year Adjusted EPS because the Company
believes this amount neither relates to the ordinary course of the
Company's business nor reflects the Company's underlying business
performance.
See endnotes (1) and (2) on page 22 for definitions of non-GAAP
financial measures. Reconciliations of each non-GAAP financial
measure to the most directly comparable GAAP financial measure are
presented on pages 13 through 14 and page 21.
Reconciliations of
Non-GAAP Financial Measures to the Most Directly Comparable GAAP
Financial Measures
|
|
Adjusted Operating
Income
|
(Unaudited)
|
|
The following are
reconciliations of operating income to adjusted operating
income:
|
|
|
Three Months Ended
June 30, 2020
|
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income
(loss) (GAAP measure)
|
$
|
1,271
|
|
|
$
|
933
|
|
|
$
|
3,066
|
|
|
$
|
(413)
|
|
|
$
|
(177)
|
|
|
$
|
4,680
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
56
|
|
|
124
|
|
|
398
|
|
|
—
|
|
|
—
|
|
|
578
|
|
Acquisition-related
integration costs
|
—
|
|
|
—
|
|
|
—
|
|
|
70
|
|
|
—
|
|
|
70
|
|
Adjusted operating
income (loss) (1)
|
$
|
1,327
|
|
|
$
|
1,057
|
|
|
$
|
3,464
|
|
|
$
|
(343)
|
|
|
$
|
(177)
|
|
|
$
|
5,328
|
|
|
Three Months Ended
June 30, 2019
|
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income
(loss) (GAAP measure)
|
$
|
1,197
|
|
|
$
|
1,551
|
|
|
$
|
1,062
|
|
|
$
|
(308)
|
|
|
$
|
(170)
|
|
|
$
|
3,332
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
99
|
|
|
118
|
|
|
376
|
|
|
—
|
|
|
—
|
|
|
593
|
|
Acquisition-related
integration costs
|
—
|
|
|
—
|
|
|
—
|
|
|
106
|
|
|
—
|
|
|
106
|
|
Adjusted operating
income (loss) (1)
|
$
|
1,296
|
|
|
$
|
1,669
|
|
|
$
|
1,438
|
|
|
$
|
(202)
|
|
|
$
|
(170)
|
|
|
$
|
4,031
|
|
|
Six Months Ended
June 30, 2020
|
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health
Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income
(loss) (GAAP measure)
|
$
|
2,385
|
|
|
$
|
2,713
|
|
|
$
|
4,161
|
|
|
$
|
(768)
|
|
|
$
|
(353)
|
|
|
$
|
8,138
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
123
|
|
|
246
|
|
|
794
|
|
|
1
|
|
|
—
|
|
|
1,164
|
|
Acquisition-related
integration costs
|
—
|
|
|
—
|
|
|
—
|
|
|
139
|
|
|
—
|
|
|
139
|
|
Adjusted operating
income (loss) (1)
|
$
|
2,508
|
|
|
$
|
2,959
|
|
|
$
|
4,955
|
|
|
$
|
(628)
|
|
|
$
|
(353)
|
|
|
$
|
9,441
|
|
|
Six Months Ended
June 30, 2019
|
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income
(loss) (GAAP measure)
|
$
|
2,047
|
|
|
$
|
2,789
|
|
|
$
|
2,217
|
|
|
$
|
(689)
|
|
|
$
|
(342)
|
|
|
$
|
6,022
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
196
|
|
|
234
|
|
|
783
|
|
|
2
|
|
|
—
|
|
|
1,215
|
|
Acquisition-related
integration costs
|
—
|
|
|
—
|
|
|
—
|
|
|
254
|
|
|
—
|
|
|
254
|
|
Store rationalization
charge
|
—
|
|
|
135
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
135
|
|
Adjusted operating
income (loss) (1)
|
$
|
2,243
|
|
|
$
|
3,158
|
|
|
$
|
3,000
|
|
|
$
|
(433)
|
|
|
$
|
(342)
|
|
|
$
|
7,626
|
|
Adjusted Earnings
Per Share
|
(Unaudited)
|
|
The following are
reconciliations of net income attributable to CVS Health to
adjusted income attributable to CVS Health and
calculations of GAAP diluted EPS and Adjusted EPS:
|
|
|
Three Months
Ended
June 30, 2020
|
|
Three Months
Ended
June 30, 2019
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Net income (GAAP
measure)
|
$
|
2,986
|
|
|
|
|
$
|
1,931
|
|
|
|
Net (income) loss
attributable to noncontrolling interests (GAAP measure)
|
(11)
|
|
|
|
|
5
|
|
|
|
Income allocable to
participating securities (GAAP measure)
|
—
|
|
|
|
|
(1)
|
|
|
|
Net income
attributable to CVS Health (GAAP measure)
|
2,975
|
|
|
$
|
2.26
|
|
|
1,935
|
|
|
$
|
1.49
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
578
|
|
|
0.44
|
|
|
593
|
|
|
0.45
|
|
Acquisition-related
integration costs
|
70
|
|
|
0.06
|
|
|
106
|
|
|
0.08
|
|
Income tax
benefit
|
(155)
|
|
|
(0.12)
|
|
|
(172)
|
|
|
(0.13)
|
|
Adjusted income
attributable to CVS Health (2)
|
$
|
3,468
|
|
|
$
|
2.64
|
|
|
$
|
2,462
|
|
|
$
|
1.89
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,314
|
|
|
|
|
1,302
|
|
|
Six Months
Ended
June 30, 2020
|
|
Six Months
Ended
June 30, 2019
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Net income (GAAP
measure)
|
$
|
4,998
|
|
|
|
|
$
|
3,358
|
|
|
|
Net income
attributable to noncontrolling interests (GAAP measure)
|
(16)
|
|
|
|
|
(1)
|
|
|
|
Income allocable to
participating securities (GAAP measure)
|
—
|
|
|
|
|
(3)
|
|
|
|
Net income
attributable to CVS Health (GAAP measure)
|
4,982
|
|
|
$
|
3.79
|
|
|
3,354
|
|
|
$
|
2.58
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
1,164
|
|
|
0.89
|
|
|
1,215
|
|
|
0.93
|
|
Acquisition-related
integration costs
|
139
|
|
|
0.11
|
|
|
254
|
|
|
0.20
|
|
Store rationalization
charge
|
—
|
|
|
—
|
|
|
135
|
|
|
0.10
|
|
Income tax
benefit
|
(315)
|
|
|
(0.24)
|
|
|
(391)
|
|
|
(0.30)
|
|
Adjusted income
attributable to CVS Health (2)
|
$
|
5,970
|
|
|
$
|
4.55
|
|
|
$
|
4,567
|
|
|
$
|
3.51
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,313
|
|
|
|
|
1,302
|
|
Supplemental
Information
|
(Unaudited)
|
|
The Company's
segments maintain separate financial information, and the Company's
chief operating decision maker (the "CODM") evaluates the segments'
operating results on a regular basis in deciding how to allocate
resources among the segments and in assessing segment performance.
The CODM evaluates the performance of the Company's segments based
on adjusted operating income, which is defined as operating income
(GAAP measure) excluding the impact of amortization of intangible
assets and other items, if any, that neither relate to the ordinary
course of the Company's business nor reflect the Company's
underlying business performance as further described in endnote
(1). The Company uses adjusted operating income as its principal
measure of segment performance as it enhances the Company's ability
to compare past financial performance with current performance and
analyze underlying business performance and trends.
|
|
The following is a
reconciliation of financial measures of the Company's segments to
the consolidated totals:
|
|
In millions
|
Pharmacy
Services (a)
|
|
Retail/
LTC
|
|
Health Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations (b)
|
|
Consolidated
Totals
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
34,889
|
|
|
$
|
21,662
|
|
|
$
|
18,468
|
|
|
$
|
86
|
|
|
$
|
(9,764)
|
|
|
$
|
65,341
|
|
Operating income
(loss)
|
1,271
|
|
|
933
|
|
|
3,066
|
|
|
(413)
|
|
|
(177)
|
|
|
4,680
|
|
Adjusted operating
income (loss) (1)
|
1,327
|
|
|
1,057
|
|
|
3,464
|
|
|
(343)
|
|
|
(177)
|
|
|
5,328
|
|
June 30,
2019
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
34,842
|
|
|
21,447
|
|
|
17,403
|
|
|
161
|
|
|
(10,422)
|
|
|
63,431
|
|
Operating income
(loss)
|
1,197
|
|
|
1,551
|
|
|
1,062
|
|
|
(308)
|
|
|
(170)
|
|
|
3,332
|
|
Adjusted operating
income (loss) (1)
|
1,296
|
|
|
1,669
|
|
|
1,438
|
|
|
(202)
|
|
|
(170)
|
|
|
4,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
69,872
|
|
|
$
|
44,411
|
|
|
$
|
37,666
|
|
|
$
|
176
|
|
|
$
|
(20,029)
|
|
|
$
|
132,096
|
|
Operating income
(loss)
|
2,385
|
|
|
2,713
|
|
|
4,161
|
|
|
(768)
|
|
|
(353)
|
|
|
8,138
|
|
Adjusted operating
income (loss) (1)
|
2,508
|
|
|
2,959
|
|
|
4,955
|
|
|
(628)
|
|
|
(353)
|
|
|
9,441
|
|
June 30,
2019
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
68,400
|
|
|
42,562
|
|
|
35,273
|
|
|
271
|
|
|
(21,429)
|
|
|
125,077
|
|
Operating income
(loss)
|
2,047
|
|
|
2,789
|
|
|
2,217
|
|
|
(689)
|
|
|
(342)
|
|
|
6,022
|
|
Adjusted operating
income (loss) (1)
|
2,243
|
|
|
3,158
|
|
|
3,000
|
|
|
(433)
|
|
|
(342)
|
|
|
7,626
|
|
_____________________________________________
(a)
|
Total revenues of the
Pharmacy Services segment include approximately $2.6 billion and
$2.9 billion of retail co-payments for the three months ended
June 30, 2020 and 2019, respectively, and $6.0 billion and
$6.2 billion of retail co-payments for the six months ended
June 30, 2020 and 2019, respectively.
|
(b)
|
Intersegment
eliminations relate to intersegment revenue generating
activities that occur between the Pharmacy Services segment, the
Retail/LTC segment and/or the Health Care Benefits
segment.
|
Supplemental
Information
|
(Unaudited)
|
|
Pharmacy Services
Segment
|
|
The following table
summarizes the Pharmacy Services segment's performance for the
respective periods:
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
Three Months
Ended June 30,
2020 vs 2019
|
|
Six Months
Ended June 30,
2020 vs 2019
|
In millions, except
percentages
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
$
|
34,595
|
|
|
$
|
34,723
|
|
|
$
|
69,341
|
|
|
$
|
68,173
|
|
|
$
|
(128)
|
|
|
(0.4)
|
%
|
|
$
|
1,168
|
|
|
1.7
|
%
|
Services
|
294
|
|
|
119
|
|
|
531
|
|
|
227
|
|
|
175
|
|
|
147.1
|
%
|
|
304
|
|
|
133.9
|
%
|
Total
revenues
|
34,889
|
|
|
34,842
|
|
|
69,872
|
|
|
68,400
|
|
|
47
|
|
|
0.1
|
%
|
|
1,472
|
|
|
2.2
|
%
|
Cost of products
sold
|
33,271
|
|
|
33,279
|
|
|
66,774
|
|
|
65,618
|
|
|
(8)
|
|
|
—
|
%
|
|
1,156
|
|
|
1.8
|
%
|
Gross margin
(10)
|
1,618
|
|
|
1,563
|
|
|
3,098
|
|
|
2,782
|
|
|
55
|
|
|
3.5
|
%
|
|
316
|
|
|
11.4
|
%
|
Gross margin as a %
of
total revenues (10)
|
4.6
|
%
|
|
4.5
|
%
|
|
4.4
|
%
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
Operating
expenses
|
347
|
|
|
366
|
|
|
713
|
|
|
735
|
|
|
(19)
|
|
|
(5.2)
|
%
|
|
(22)
|
|
|
(3.0)
|
%
|
Operating expenses as
a % of
total revenues
|
1.0
|
%
|
|
1.1
|
%
|
|
1.0
|
%
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
1,271
|
|
|
$
|
1,197
|
|
|
$
|
2,385
|
|
|
$
|
2,047
|
|
|
$
|
74
|
|
|
6.2
|
%
|
|
$
|
338
|
|
|
16.5
|
%
|
Operating income as a
% of
total revenues
|
3.6
|
%
|
|
3.4
|
%
|
|
3.4
|
%
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
Adjusted operating
income (1)
|
$
|
1,327
|
|
|
$
|
1,296
|
|
|
$
|
2,508
|
|
|
$
|
2,243
|
|
|
$
|
31
|
|
|
2.4
|
%
|
|
$
|
265
|
|
|
11.8
|
%
|
Adjusted operating
income as a % of
total revenues
|
3.8
|
%
|
|
3.7
|
%
|
|
3.6
|
%
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
Revenues (by
distribution channel):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmacy network
(6) (14)
|
$
|
20,536
|
|
|
$
|
21,974
|
|
|
$
|
41,636
|
|
|
$
|
43,506
|
|
|
$
|
(1,438)
|
|
|
(6.5)
|
%
|
|
$
|
(1,870)
|
|
|
(4.3)
|
%
|
Mail choice (7)
(14)
|
14,109
|
|
|
12,724
|
|
|
27,783
|
|
|
24,605
|
|
|
1,385
|
|
|
10.9
|
%
|
|
3,178
|
|
|
12.9
|
%
|
Other
|
244
|
|
|
144
|
|
|
453
|
|
|
289
|
|
|
100
|
|
|
69.4
|
%
|
|
164
|
|
|
56.7
|
%
|
Pharmacy claims
processed: (4) (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
505.4
|
|
|
489.0
|
|
|
1,046.8
|
|
|
970.8
|
|
|
16.4
|
|
|
3.4
|
%
|
|
76.0
|
|
|
7.8
|
%
|
Pharmacy network
(6)
|
425.1
|
|
|
412.1
|
|
|
886.2
|
|
|
819.8
|
|
|
13.0
|
|
|
3.2
|
%
|
|
66.4
|
|
|
8.1
|
%
|
Mail choice
(7)
|
80.3
|
|
|
76.9
|
|
|
160.6
|
|
|
151.0
|
|
|
3.4
|
|
|
4.4
|
%
|
|
9.6
|
|
|
6.4
|
%
|
Generic dispensing
rate: (4) (11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
88.7
|
%
|
|
88.5
|
%
|
|
88.8
|
%
|
|
88.4
|
%
|
|
|
|
|
|
|
|
|
Pharmacy network
(6)
|
89.3
|
%
|
|
89.1
|
%
|
|
89.4
|
%
|
|
89.0
|
%
|
|
|
|
|
|
|
|
|
Mail choice
(7)
|
85.7
|
%
|
|
85.2
|
%
|
|
85.7
|
%
|
|
85.0
|
%
|
|
|
|
|
|
|
|
|
Supplemental
Information
|
(Unaudited)
|
|
Retail/LTC
Segment
|
|
The following table
summarizes the Retail/LTC segment's performance for the respective
periods:
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
Three Months
Ended June 30,
2020 vs 2019
|
|
Six Months
Ended June 30,
2020 vs 2019
|
In millions, except
percentages
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
$
|
21,476
|
|
|
$
|
21,230
|
|
|
$
|
43,998
|
|
|
$
|
42,130
|
|
|
$
|
246
|
|
|
1.2
|
%
|
|
$
|
1,868
|
|
|
4.4
|
%
|
Services
|
186
|
|
|
217
|
|
|
413
|
|
|
432
|
|
|
(31)
|
|
|
(14.3)
|
%
|
|
(19)
|
|
|
(4.4)
|
%
|
Total
revenues
|
21,662
|
|
|
21,447
|
|
|
44,411
|
|
|
42,562
|
|
|
215
|
|
|
1.0
|
%
|
|
1,849
|
|
|
4.3
|
%
|
Cost of products
sold
|
16,220
|
|
|
15,551
|
|
|
32,798
|
|
|
30,848
|
|
|
669
|
|
|
4.3
|
%
|
|
1,950
|
|
|
6.3
|
%
|
Gross margin
(10)
|
5,442
|
|
|
5,896
|
|
|
11,613
|
|
|
11,714
|
|
|
(454)
|
|
|
(7.7)
|
%
|
|
(101)
|
|
|
(0.9)
|
%
|
Gross margin as a %
of total
revenues (10)
|
25.1
|
%
|
|
27.5
|
%
|
|
26.1
|
%
|
|
27.5
|
%
|
|
|
|
|
|
|
|
|
Operating
expenses
|
4,509
|
|
|
4,345
|
|
|
8,900
|
|
|
8,925
|
|
|
164
|
|
|
3.8
|
%
|
|
(25)
|
|
|
(0.3)
|
%
|
Operating expenses as
a % of
total revenues
|
20.8
|
%
|
|
20.3
|
%
|
|
20.0
|
%
|
|
21.0
|
%
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
933
|
|
|
$
|
1,551
|
|
|
$
|
2,713
|
|
|
$
|
2,789
|
|
|
$
|
(618)
|
|
|
(39.8)
|
%
|
|
$
|
(76)
|
|
|
(2.7)
|
%
|
Operating income as a
% of
total revenues
|
4.3
|
%
|
|
7.2
|
%
|
|
6.1
|
%
|
|
6.6
|
%
|
|
|
|
|
|
|
|
|
Adjusted operating
income (1)
|
$
|
1,057
|
|
|
$
|
1,669
|
|
|
$
|
2,959
|
|
|
$
|
3,158
|
|
|
$
|
(612)
|
|
|
(36.7)
|
%
|
|
$
|
(199)
|
|
|
(6.3)
|
%
|
Adjusted operating
income as a
% of total revenues
|
4.9
|
%
|
|
7.8
|
%
|
|
6.7
|
%
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
Revenues (by
major
goods/service lines):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmacy
|
$
|
16,870
|
|
|
$
|
16,392
|
|
|
$
|
34,225
|
|
|
$
|
32,510
|
|
|
$
|
478
|
|
|
2.9
|
%
|
|
$
|
1,715
|
|
|
5.3
|
%
|
Front
Store
|
4,653
|
|
|
4,875
|
|
|
9,861
|
|
|
9,674
|
|
|
(222)
|
|
|
(4.6)
|
%
|
|
187
|
|
|
1.9
|
%
|
Other
|
139
|
|
|
180
|
|
|
325
|
|
|
378
|
|
|
(41)
|
|
|
(22.8)
|
%
|
|
(53)
|
|
|
(14.0)
|
%
|
Prescriptions filled
(4) (5)
|
345.4
|
|
|
349.1
|
|
|
720.5
|
|
|
695.9
|
|
|
(3.7)
|
|
|
(1.1)
|
%
|
|
24.6
|
|
|
3.5
|
%
|
Same store sales
increase
(decrease): (12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
2.4
|
%
|
|
4.2
|
%
|
|
5.7
|
%
|
|
4.0
|
%
|
|
|
|
|
|
|
|
|
Pharmacy
|
4.6
|
%
|
|
4.7
|
%
|
|
6.9
|
%
|
|
4.8
|
%
|
|
|
|
|
|
|
|
|
Front
Store
|
(4.5)
|
%
|
|
2.9
|
%
|
|
1.7
|
%
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
Prescription volume
(4)
|
0.6
|
%
|
|
7.2
|
%
|
|
5.2
|
%
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
Generic dispensing
rate (4) (11)
|
89.1
|
%
|
|
89.0
|
%
|
|
89.2
|
%
|
|
88.9
|
%
|
|
|
|
|
|
|
|
|
Supplemental
Information
|
(Unaudited)
|
|
Health Care
Benefits Segment
|
|
The following table
summarizes the Health Care Benefits segment's performance for the
respective periods:
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
Three Months
Ended
June 30,
2020 vs 2019
|
|
Six Months
Ended
June 30,
2020 vs 2019
|
In millions, except percentages
and basis points ("bps")
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
$
|
16,913
|
|
|
$
|
15,777
|
|
|
$
|
34,534
|
|
|
$
|
32,036
|
|
|
$
|
1,136
|
|
|
7.2
|
%
|
|
$
|
2,498
|
|
|
7.8
|
%
|
Services
|
1,428
|
|
|
1,478
|
|
|
2,912
|
|
|
2,925
|
|
|
(50)
|
|
|
(3.4)
|
%
|
|
(13)
|
|
|
(0.4)
|
%
|
Net investment
income
|
127
|
|
|
148
|
|
|
220
|
|
|
312
|
|
|
(21)
|
|
|
(14.2)
|
%
|
|
(92)
|
|
|
(29.5)
|
%
|
Total
revenues
|
18,468
|
|
|
17,403
|
|
|
37,666
|
|
|
35,273
|
|
|
1,065
|
|
|
6.1
|
%
|
|
2,393
|
|
|
6.8
|
%
|
Benefit
costs
|
11,884
|
|
|
13,246
|
|
|
26,400
|
|
|
26,901
|
|
|
(1,362)
|
|
|
(10.3)
|
%
|
|
(501)
|
|
|
(1.9)
|
%
|
MBR (Benefit costs as
a % of
premium revenues) (8)
|
|
70.3
|
%
|
|
84.0
|
%
|
|
76.4
|
%
|
|
84.0
|
%
|
|
(1,370)
|
bps
|
|
|
|
|
(760)
|
bps
|
|
|
|
Operating
expenses
|
$
|
3,518
|
|
|
$
|
3,095
|
|
|
$
|
7,105
|
|
|
$
|
6,155
|
|
|
$
|
423
|
|
|
13.7
|
%
|
|
$
|
950
|
|
|
15.4
|
%
|
Operating expenses as
a % of
total
revenues
|
19.0
|
%
|
|
17.8
|
%
|
|
18.9
|
%
|
|
17.4
|
%
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
3,066
|
|
|
$
|
1,062
|
|
|
$
|
4,161
|
|
|
$
|
2,217
|
|
|
$
|
2,004
|
|
|
188.7
|
%
|
|
$
|
1,944
|
|
|
87.7
|
%
|
Operating income as a
% of
total revenues
|
16.6
|
%
|
|
6.1
|
%
|
|
11.0
|
%
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
Adjusted operating
income (1)
|
$
|
3,464
|
|
|
$
|
1,438
|
|
|
$
|
4,955
|
|
|
$
|
3,000
|
|
|
$
|
2,026
|
|
|
140.9
|
%
|
|
$
|
1,955
|
|
|
65.2
|
%
|
Adjusted operating
income as a
% of total revenues
|
18.8
|
%
|
|
8.3
|
%
|
|
13.2
|
%
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
The following table
summarizes the Health Care Benefits segment's medical membership
for the respective periods:
|
|
|
June 30,
2020
|
|
March 31,
2020
|
|
December 31,
2019
|
|
June 30,
2019
|
In thousands
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
Medical membership:
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
3,298
|
|
|
14,179
|
|
|
17,477
|
|
|
3,372
|
|
|
14,206
|
|
|
17,578
|
|
|
3,591
|
|
|
14,159
|
|
|
17,750
|
|
|
3,571
|
|
|
14,276
|
|
|
17,847
|
|
Medicare
Advantage
|
2,651
|
|
|
—
|
|
|
2,651
|
|
|
2,584
|
|
|
—
|
|
|
2,584
|
|
|
2,321
|
|
|
—
|
|
|
2,321
|
|
|
2,264
|
|
|
—
|
|
|
2,264
|
|
Medicare
Supplement
|
954
|
|
|
—
|
|
|
954
|
|
|
913
|
|
|
—
|
|
|
913
|
|
|
881
|
|
|
—
|
|
|
881
|
|
|
819
|
|
|
—
|
|
|
819
|
|
Medicaid
|
1,918
|
|
|
586
|
|
|
2,504
|
|
|
1,835
|
|
|
552
|
|
|
2,387
|
|
|
1,398
|
|
|
558
|
|
|
1,956
|
|
|
1,344
|
|
|
562
|
|
|
1,906
|
|
Total medical
membership
|
8,821
|
|
|
14,765
|
|
|
23,586
|
|
|
8,704
|
|
|
14,758
|
|
|
23,462
|
|
|
8,191
|
|
|
14,717
|
|
|
22,908
|
|
|
7,998
|
|
|
14,838
|
|
|
22,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
membership information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Prescription
Drug Plan
(standalone) (a)
|
5,575
|
|
|
|
|
|
|
5,624
|
|
|
|
|
|
|
5,994
|
|
|
|
|
|
|
6,004
|
|
_____________________________________________
(a)
|
Represents the
Company's SilverScript® PDP membership only. Excludes
2.5 million members as of both December 31, 2019 and June 30,
2019 related to Aetna's standalone PDPs that were sold effective
December 31, 2018. The Company retained the financial results of
the divested plans through 2019 through a reinsurance agreement.
Subsequent to 2019, the Company no longer retains the financial
results of the divested plans.
|
Supplemental
Information
|
(Unaudited)
|
|
The following table
shows the components of the change in health care costs payable
during the six months ended June 30, 2020 and 2019:
|
|
|
Six Months
Ended
June 30,
|
In millions
|
2020
|
|
2019
|
Health care costs
payable, beginning of period
|
$
|
6,879
|
|
|
$
|
6,147
|
|
Less: Reinsurance
recoverables
|
5
|
|
|
4
|
|
Health care costs
payable, beginning of period, net
|
6,874
|
|
|
6,143
|
|
Acquisition
|
412
|
|
|
—
|
|
Add: Components of
incurred health care costs
|
|
|
|
Current
year
|
26,390
|
|
|
26,864
|
|
Prior years
(a)
|
(420)
|
|
|
(489)
|
|
Total incurred health
care costs (b)
|
25,970
|
|
|
26,375
|
|
Less: Claims
paid
|
|
|
|
Current
year
|
20,223
|
|
|
20,552
|
|
Prior
years
|
5,704
|
|
|
5,095
|
|
Total claims
paid
|
25,927
|
|
|
25,647
|
|
Add: Premium
deficiency reserve
|
29
|
|
|
14
|
|
Health care costs
payable, end of period, net
|
7,358
|
|
|
6,885
|
|
Add: Reinsurance
recoverables
|
4
|
|
|
4
|
|
Health care costs
payable, end of period
|
$
|
7,362
|
|
|
$
|
6,889
|
|
_____________________________________________
(a)
|
Negative amounts
reported for incurred health care costs related to prior years
result from claims being settled for amounts less than originally
estimated.
|
(b)
|
Total incurred health
care costs for the six months ended June 30, 2020 and 2019 in the
table above exclude (i) $29 million and $14 million, respectively,
related to a premium deficiency reserve related to the Company's
Medicaid products, (ii) $20 million and $21 million, respectively,
of benefit costs recorded in the Health Care Benefits segment that
are included in other insurance liabilities on the Company's
unaudited condensed consolidated balance sheets and (iii) $119
million and $136 million, respectively, of benefit costs recorded
in the Corporate/Other segment that are included in other insurance
liabilities on the Company's unaudited condensed consolidated
balance sheets.
|
The following table
summarizes the Health Care Benefits segment's days claims payable
for the respective periods:
|
|
|
June 30,
2020
|
|
March 31,
2020
|
|
December 31,
2019
|
|
June 30,
2019
|
Days Claims Payable
(13)
|
57
|
|
|
48
|
|
|
48
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information
|
(Unaudited)
|
|
Corporate/Other
Segment
|
|
The following table
summarizes the Corporate/Other segment's performance for the
respective periods:
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
Three Months
Ended
June 30,
2020 vs 2019
|
|
Six Months
Ended
June 30,
2020 vs 2019
|
In millions,
except percentages
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
$
|
14
|
|
|
$
|
14
|
|
|
$
|
33
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
(4)
|
|
|
(10.8)
|
%
|
Services
|
15
|
|
|
2
|
|
|
17
|
|
|
4
|
|
|
13
|
|
|
650.0
|
%
|
|
13
|
|
|
325.0
|
%
|
Net investment
income
|
57
|
|
|
145
|
|
|
126
|
|
|
230
|
|
|
(88)
|
|
|
(60.7)
|
%
|
|
(104)
|
|
|
(45.2)
|
%
|
Total
revenues
|
86
|
|
|
161
|
|
|
176
|
|
|
271
|
|
|
(75)
|
|
|
(46.6)
|
%
|
|
(95)
|
|
|
(35.1)
|
%
|
Benefit
costs
|
51
|
|
|
57
|
|
|
119
|
|
|
136
|
|
|
(6)
|
|
|
(10.5)
|
%
|
|
(17)
|
|
|
(12.5)
|
%
|
Operating
expenses
|
448
|
|
|
412
|
|
|
825
|
|
|
824
|
|
|
36
|
|
|
8.7
|
%
|
|
1
|
|
|
0.1
|
%
|
Operating
loss
|
(413)
|
|
|
(308)
|
|
|
(768)
|
|
|
(689)
|
|
|
(105)
|
|
|
(34.1)
|
%
|
|
(79)
|
|
|
(11.5)
|
%
|
Adjusted operating
loss (1)
|
(343)
|
|
|
(202)
|
|
|
(628)
|
|
|
(433)
|
|
|
(141)
|
|
|
(69.8)
|
%
|
|
(195)
|
|
|
(45.0)
|
%
|
Adjusted Earnings
Per Share Guidance
|
(Unaudited)
|
|
The following
reconciliations of projected net income to projected adjusted
income attributable to CVS Health and calculations of projected
GAAP diluted EPS and projected Adjusted EPS contain forward-looking
information. All forward-looking information involves risks and
uncertainties. Actual results may differ materially from those
contemplated by the forward-looking information due to the risks
and uncertainties related to the COVID-19 pandemic, the severity
and duration of the pandemic, the pandemic's impact on the U.S. and
global economies and consumer behavior and health care utilization
patterns, and the timing, scope and impact of stimulus legislation
and other federal, state and local governmental responses to the
pandemic, as well as the risks and uncertainties described in our
SEC filings, including those set forth in the Risk Factors section
and under the heading "Cautionary Statement Concerning
Forward-Looking Statements" in our most recently filed Annual
Report on Form 10-K, our Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2020 and our recently filed Current
Reports on Form 8-K. See "Non-GAAP Financial Information" earlier
in this press release and endnote (2) later in this press release
for more information on how we calculate Adjusted EPS.
|
|
|
|
Year Ending
December 31, 2020
|
|
Low
|
|
High
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Net income
attributable to CVS Health (GAAP measure)
|
7,375
|
|
|
$
|
5.59
|
|
|
7,545
|
|
|
$
|
5.72
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
2,320
|
|
|
1.76
|
|
|
2,320
|
|
|
1.76
|
|
Acquisition-related
integration costs
|
450
|
|
|
0.34
|
|
|
450
|
|
|
0.34
|
|
Gain on divestiture
of subsidiary
|
(225)
|
|
|
(0.17)
|
|
|
(225)
|
|
|
(0.17)
|
|
Income tax
benefit
|
(495)
|
|
|
(0.38)
|
|
|
(495)
|
|
|
(0.38)
|
|
Adjusted income
attributable to CVS Health (2)
|
$
|
9,425
|
|
|
$
|
7.14
|
|
|
$
|
9,595
|
|
|
$
|
7.27
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,320
|
|
|
|
|
1,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Endnotes
(1) The Company defines adjusted operating
income as operating income (GAAP measure) excluding the impact of
amortization of intangible assets and other items, if any, that
neither relate to the ordinary course of the Company's business nor
reflect the Company's underlying business performance, such as
acquisition-related integration costs, store rationalization
charges, gains/losses on divestitures and any other items
specifically identified herein. See "Non-GAAP Financial
Information" earlier in this press release for additional
information regarding the items excluded from operating income.
(2) The Company defines adjusted income
attributable to CVS Health as net income attributable to CVS Health
(GAAP measure) excluding the impact of amortization of intangible
assets and other items, if any, that neither relate to the ordinary
course of the Company's business nor reflect the Company's
underlying business performance, such as acquisition-related
integration costs, store rationalization charges, gains/losses on
divestitures, the corresponding income tax benefit or expense
related to the items excluded from adjusted income attributable to
CVS Health, and any other items specifically identified herein.
GAAP diluted EPS and Adjusted EPS, respectively, are calculated by
dividing net income attributable to CVS Health and adjusted income
attributable to CVS Health by the Company's weighted average
diluted shares outstanding. See "Non-GAAP Financial Information"
earlier in this press release for additional information regarding
the items excluded from net income attributable to CVS Health and
GAAP diluted EPS.
(3) Enterprise prescriptions include
prescriptions dispensed through the Company's retail pharmacies,
long-term care pharmacies, and mail order pharmacies as well as
prescription claims managed through our pharmacy benefits manager,
with an elimination for managed prescription claims filled through
CVS Health dispensing channels. Management uses this metric to
analyze the total prescription volume across the Company including
variances between actual prescriptions and expected amounts as well
as trends in period-over-period results. This metric provides
management and investors with information useful in understanding
the impact of prescription volume on total revenues and operating
results.
(4) Includes an adjustment to convert 90-day
prescriptions to the equivalent of three 30-day prescriptions. This
adjustment reflects the fact that these prescriptions include
approximately three times the amount of product days supplied
compared to a normal prescription.
(5) Total pharmacy claims processed represents
the number of prescription claims processed through our pharmacy
benefits manager and dispensed by either our retail network
pharmacies or our own mail and specialty pharmacies. Prescriptions
filled represents the number of prescriptions dispensed through the
Retail/LTC segment's pharmacies. Management uses these metrics to
understand variances between actual claims processed and
prescriptions dispensed, respectively, and expected amounts as well
as trends in period-over-period results. These metrics provide
management and investors with information useful in understanding
the impact of pharmacy claim volume and prescription volume,
respectively, on segment total revenues and operating results.
(6) Pharmacy network is defined as claims
filled at retail and specialty retail pharmacies, including the
Company's retail pharmacies and long-term care pharmacies, but
excluding Maintenance Choice activity, which is included within the
mail choice category. Maintenance Choice permits eligible client
plan members to fill their maintenance prescriptions through mail
order delivery or at a CVS Pharmacy retail store for the same price
as mail order.
(7) Mail choice is defined as claims filled at
a Pharmacy Services mail order facility, which includes specialty
mail claims inclusive of Specialty Connect® claims
picked up at a retail pharmacy, as well as prescriptions filled at
the Company's retail pharmacies under the Maintenance Choice
program.
(8) Medical benefit ratio is calculated as
benefit costs divided by premium revenues and represents the
percentage of premium revenues spent on medical benefits for the
Company's insured members. Management uses MBR to assess the
underlying business performance and underwriting of its insurance
products, understand variances between actual results and expected
results and identify trends in period-over-period results. MBR
provides management and investors with information useful in
assessing the operating results of the Company's insured Health
Care Benefits products.
(9) Medical membership represents the number of
members covered by the Company's insured and ASC medical products
and related services at a specified point in time. Management uses
this metric to understand variances between actual medical
membership and expected amounts as well as trends in
period-over-period results. This metric provides management and
investors with information useful in understanding the impact of
medical membership on segment total revenues and operating
results.
(10) Gross margin is calculated as the segment's
total revenues less its cost of products sold. Gross margin as a
percentage of total revenues is calculated by dividing the
segment's gross margin by its total revenues and represents the
percentage of total revenues that remains after incurring direct
costs associated with the segment's products sold and services
provided. Gross margin as a percentage of total revenues provides
investors with information that may be useful in assessing the
operating results of the Company's Pharmacy Services and Retail/LTC
segments.
(11) Generic dispensing rate is calculated by
dividing the segment's generic drug prescriptions processed or
filled by its total prescriptions processed or filled. Management
uses this metric to evaluate the effectiveness of the business at
encouraging the use of generic drugs when they are available and
clinically appropriate, which aids in decreasing costs for client
members and retail customers. This metric provides management and
investors with information useful in understanding trends in
segment total revenues and operating results.
(12) Same store sales and prescription volume
represent the change in revenues and prescriptions filled in the
Company's retail pharmacy stores that have been operating for
greater than one year, expressed as a percentage that indicates the
increase or decrease relative to the comparable prior period. Same
store metrics exclude revenues from
MinuteClinic®, revenues and prescriptions from LTC
operations and, in 2019, revenues and prescriptions from stores in
Brazil. Management uses these
metrics to evaluate the performance of existing stores on a
comparable basis and to inform future decisions regarding existing
stores and new locations. Same-store metrics provide management and
investors with information useful in understanding the portion
of current revenues and prescriptions resulting from organic growth
in existing locations versus the portion resulting from opening new
stores.
(13) Days claims payable is calculated by
dividing the health care costs payable at the end of each quarter
by the average health care costs per day during such quarter.
Management and investors use this metric as an indicator of the
adequacy of the Company's health care costs payable liability at
the end of each quarter and as an indicator of changes in such
adequacy over time.
(14) Certain prior year amounts have been
reclassified for consistency with the current period
presentation.
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SOURCE CVS Health Corporation